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COVID-19 Care tax support

Thankfully, tax measures can help blunt the economic challenges that nurseries and early years businesses are currently facing as a result of the current unsettled climate that’s arisen from Covid-19.

Below we’ve set out some support which care organisations can seek in this difficult period through the tax system, including:

 

VAT payment deferral

Care organisations can now defer their VAT payments to HMRC which will aid cash flow.

The Government’s announcement provided little detail. We have been working with HMRC to provide practical information (which we share below) to help organisations and their advisers counter the economic impact of Covid-19.

Immediate action

Deferment of VAT payments is effective immediately. Any VAT direct debits to HMRC should be cancelled now or payments will still be taken automatically. These VAT direct debits should be restarted after 30 June 2020 (though the period could be extended, watch for HMRC announcements).

What is deferred?

The deferment applies to VAT payments due to be made to HMRC between 20 March 2020 and 30 June 2020 (rather than relating to VAT returns covering this period or the tax point of a transaction, etc.) and these payments will instead fall due at the end of the tax year.  HMRC have said that ‘tax year’ in this context means 31 March 2021.

HMRC say that interest will not be applied to the deferred VAT payments. It is hoped that HMRC will also not apply default surcharges or increase default surcharge periods/rates as the result of deferment.

Any VAT due for payment after 30 June 2020 will still have to be paid to HMRC (as things stand, but watch for official announcements).

However, VAT returns must still be submitted on time: it is only the payment which is deferred.  Since VAT refunds and reclaims will be paid by the Government as usual, if a business in the care sector is due to receive a repayment in its next VAT return, submit that VAT return as early as possible. You should then consider opting for monthly VAT returns.

What types of VAT payment are deferrable?

The VAT liability stated in box five of the VAT return and payable to HMRC within the specified period will be deferrable.

HMRC are saying that payment on account instalments and annual accounting payments can also be deferred where the due date falls between 20 March 2020 and 30 June 2020.

HMRC are currently inconsistent as to whether VAT amounts payable as the result of an assessment are also deferrable when the due date falls in the specified period.  In the absence of a clear deferment of assessed VAT liability, prompt action is required as the deadline for appeals is 30 days (although Tribunals and HMRC are making announcements as to deadlines too). We will continue to accumulate information as HMRC’s policies settle.

HMRC are also currently inconsistent as to whether they might accept deferral of the payment instalments under a Time To Pay arrangement. Even if deferment is agreed in relation to any VAT payments, we have been alerted that HMRC’s Debt Management Unit might still try to chase for payment and should therefore be contacted on 0300 200 3838.

Although payment of VAT on imports can be described as a VAT payment due to HMRC, VAT on importation is currently payable as usual and is not deferred, as with any other transaction.

Eligibility criteria

Entitlement is automatic, no application is required.

All UK businesses are eligible so care organisations are already entitled. HMRC are still working on their policy regarding non-UK businesses.

Income Tax payment deferral

To support self-employed individuals throughout this time, the Chancellor has announced that payments under Income Tax Self-Assessment, normally due on 31 July 2020, will be deferred until 31 January 2021.

During this period, individuals will not be charged any penalties or interest for late payment.
The deferral will apply automatically to all. Taxpayers who believe that their 2019/20 income will be lower than their 2018/19 income can make a claim to reduce their payments on account. 

Early income tax return preparation

Individuals and companies who believe that they may be entitled to a tax repayment in respect of the 2019/20 tax year may wish to submit their tax returns earlier rather than later to accelerate any repayment.

If you are unsure as to whether you are due a repayment, it may still be worth preparing the returns to establish if any repayment is due. If no repayment is due, the returns can always be submitted later in the year.

Time to Pay arrangements (including deferral)

Time To Pay arrangements can be negotiated with HMRC to stagger VAT liability payments across a longer period of time.

The Government announced in the Budget 2020 that Time To Pay arrangements would be relaxed.  Such an arrangement should be sought if taxpayers have problems making VAT or any other payments after these deferral periods expire.

For VAT liabilities (as noted above), HMRC are currently inconsistent as to whether they might accept deferral of the payment instalments under a Time To Pay arrangement. Even if deferment is agreed in relation to any VAT payments, we have been alerted that HMRC’s Debt Management Unit might still try to chase for payment and should be contacted on 0300 200 3838.

R&D tax credit

Cash flow can be aided through tax relief against qualifying R&D expenditure.  Such relief would provide a welcome boost at an important time.

Businesses may qualify for the scheme if they have undertaken the development or improvement of new products and or processes, including any significant spend on internal operational software development and integration.

Identifying and claiming the full potential of R&D tax relief can help businesses with the much needed financial support to keep going, offering a lifeline for businesses during this period of turbulence and uncertainty.  Our process is simple and effective without the need for a face-to-face meeting and we can advise whether the clients have a claim and process that claim, liaising with HMRC to secure much needed tax repayments.

COVID-19 - Tax Webinars

WATCH OUR WEBINAR ON TAX SUPPORT DURING THE COVID-19 OUTBREAK

Markel Tax specialists provide a different angle on the funding that is available to UK care businesses in these turbulent times. This webinar explains how to remain both commercially viable and to look on a more positive level at sustainable growth post Covid-19.

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WATCH OUR WEBINAR ON TAX INCENTIVES AND RELIEFS

This webinar explores what tax incentives and reliefs are available to SMEs in the care sector during this turbulent time.

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Contact our specialist tax consultancy team

Our specialist tax consultants are just a phone call away

The tax measures highlighted are aimed at giving some relief to care providers during the Covid-19 economic slowdown and beyond.  HMRC are still working on many details, for up-to-date assistance, please contact the TaxDesk on 0845 4900 509* or email taxdeskuk@markel.com

All Markel Care policyholders are entitled to 25% off the cost of a TaxDesk call and the team are on hand to support care providers either directly or in partnership with their professional advisers, such as their accountants.

*Calls from BT/standard local lines are charged at up to 5p per minute. Calls from mobile phones are charged at up to 50p per minute plus your phone company’s access charge.